Will or Trust: Is there a Preference?
People are sometimes confused about the differences between a will and a trust. Frequently, without knowing exactly why, some people believe that one is superior to the other. There are very real differences, but one is not necessarily superior to the other.
A Last Will and Testament is a document in which a person, called a “testator”, expresses what he or she desires to happen with respect to property owned by that person at the time of death. Consequently, it operates in the future—when the individual dies. At the time it is written and even for years after it is signed, it has no legal effect at all. This is why a Will can be revoked by the testator anytime during her lifetime as simply as ripping it up.
Many people erroneously believe that a will is a means by which probate is avoided. Quite the contrary, a will must be probated in order to be given effect. A will does not avoid probate; it actually requires probate. Some people also believe that the process of probate is always an overwhelming and terribly expensive process. This is not necessarily true. Probate is a court supervised process of transferring legal title of property from the decedent’s estate to the beneficiaries of the will, or if there is no will, the process by which property is transferred under the laws of succession to the heirs. Within the process of probate, the court oversees the estate’s administration to ensure that the decedent’s testamentary intent or the succession laws are followed. The time required to administer an estate and its expense is a function of how difficult a process it is to locate estate assets, heirs, beneficiaries and to resolve any claims made. Consequently, probate need not be an extreme exercise unless the circumstances are difficult.
Whether a trust is better in dealing with property following death depends upon various circumstances, and not easily reduced to simplified analysis in a blog such as this. In general, however, the purpose in such a trust is to allow it to operate in lieu of a will in the task of distributing property at death. The person creating the trust is called its “grantor.” As opposed to probate, a trust accomplishes the intended task of distributing property at the grantor’s death by means of transfers made into the trust by the grantor during his or her lifetime. After transferring this property and otherwise funding the trust, these assets are then managed and dealt with according to certain instructions provided in the trust documents. The person or entity which has this role is called a “trustee”. The trustee may be an individual or an institution such as a bank. At the death of the grantor, the trustee then distributes the property according to the plan described in the trust document. As the property is transferred to the trust during the lifetime of the individual, the grantor no longer owns the real estate, cars, stocks or any other property which has been transferred. The trust document must therefore, contain a detailed description as to how the property and assets are to be dealt with while the person creating the trust is still alive. The trust should also allow for the acquisition of additional property acquired during the lifetime of the grantor so that it may be distributed upon death according to the plan. These circumstances can, of course, create unique and varied problems such that it is always wise to consult with a professional in deciding to create a trust for testamentary purposes.